Summers: We’re Going to Have to Replace Oil Released from SPR, Which Will Raise Prices

During an interview aired on Friday’s edition of Bloomberg’s “Wall Street Week,” Harvard Professor, economist, Director of the National Economic Council under President Barack Obama, and Treasury Secretary under President Bill Clinton Larry Summers stated that while he agrees with the initial release from the Strategic Petroleum Reserve done by the Biden administration, he isn’t clear that further releases will work, partially because whatever oil gets released is “going to have to get back in at some point. And that’s going to have the opposite impact on oil prices.”

Summers said, “I think the initial SPRO release was a powerful thing that, over the last months, has done a lot to contain oil prices. And I think the Biden administration was exactly right to do it strongly, do it for a long time, do it in coordination with others. I think it’s much less clear how much scope there is for that policy to work further, going forward. In part, that’s because, many of the constraints are on the refining side. In part, that’s because it’s a little bit like QE for the Fed, whatever you put out there, you’re going to have to get back in at some point. And that’s going to have the opposite impact on oil prices. So, I think you’ve got to be careful about that instrument from here. And I think that we’ve all got to be very apprehensive about the degree of confrontation that now exists between the United States and what might be called the Russian/Saudi axis. This is going to be a very complex time, and I hope that we get through it while avoiding oil price spikes. My guess is that that’s going to happen, but I think that’s a major downside wild card from here, both with respect to inflation and with respect to recession.”

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